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Accounts Made Easy MTD Readiness Checklist — 2026/27 Edition

📄 Use this readiness checklist to prepare for HMRC Making Tax Digital (MTD for ITSA).

Making Tax Digital (MTD for ITSA) Readiness Checklist

MTD adds digital record-keeping and four quarterly updates to the annual Self Assessment process. The annual tax return remains due by 31 January. Keep this step-by-step checklist to ensure you meet digital record-keeping and quarterly submission requirements.

⚠️ CRITICAL RULES: Thresholds are based on GROSS TURNOVER & determined by PRIOR TAX RETURNS!
• Gross not Net: Eligibility is calculated on total gross business turnover and gross rent received before deducting any allowable expenses, mortgage interest, or property management costs.
• Prior Tax Year Determines Start Date: HMRC determines your start date from the qualifying income declared on an earlier tax return: 2024/25 return determines 6 April 2026 (>£50k) | 2025/26 return determines 6 April 2027 (>£30k) | 2026/27 return determines 6 April 2028 (>£20k).

1. Mandate & Phasing Verification

Calculate your Qualifying Gross Income: Sum total annual self-employed turnover + gross residential rental income. Employment income (PAYE), dividends, bank interest, and capital gains are excluded from the mandate threshold calculation.
Phase 1 Check (Over £50,000 gross): Mandated from 6 April 2026. Determined by qualifying gross income declared on your 2024/25 Self Assessment tax return.
Phase 2 Check (Over £30,000 gross): Mandated from 6 April 2027. Determined by qualifying gross income declared on your 2025/26 Self Assessment tax return (between £30,001 and £50,000).
Phase 3 Check (Over £20,000 gross): Mandated from 6 April 2028. Determined by qualifying gross income declared on your 2026/27 Self Assessment tax return (between £20,001 and £30,000).
Confirm Mandate / Exemption Status: Limited companies (SPVs), general partnerships (deferred), non-resident companies, and individuals with gross qualifying income at or under £20,000 are not currently mandated (subject to future reviews and statutory exemptions).

2. Digital Record-Keeping & Banking Setup

Segregate business & property finances: Open a dedicated bank account for property rentals and sole trader operations. Eliminates commingling of personal expenditure and enables clean digital reconciliation.
Activate automated Open Banking feeds: Connect your business and property accounts directly to your accounting software. Ensures real-time digital transaction capture without manual statement downloads.
Implement digital receipt capture: Use mobile receipt apps (e.g., Dext, Hubdoc, or software mobile camera) to photograph receipts on the go. HMRC requires invoices and receipts to be maintained in digital format. Paper shoe-boxes will no longer be workable.
Maintain unbroken digital links: Ensure data transfers between your records, spreadsheets, and software use automated formulas or digital imports. HMRC strictly prohibits manual copy-and-paste between disparate spreadsheets under MTD rules.

3. HMRC-Recognised Compatible Software

Select HMRC-compliant accounting software: Choose an officially recognised platform such as Xero, QuickBooks Online, or FreeAgent. Your software must be capable of transmitting quarterly update summaries directly to HMRC via secure APIs.
Bridging software (if retaining spreadsheets): If you continue recording transactions in spreadsheets, confirm you have an authorized API bridging application.
Authorize your ACCA-qualified accountant: Ensure your accountant is registered as your formal HMRC digital agent. Allows your accountant to review your quarterly data, adjust tax allowances, and file directly on your behalf.

4. Submission Deadlines & Cumulative Quarterly Calendar

Under HMRC rules, quarterly updates are cumulative from the beginning of the tax year. Each update covers from the start of the tax year (6 April) through to the end of that update period:

Update	Cumulative period	Deadline
Q1	6 April–5 July	7 August
Q2	6 April–5 October	7 November
Q3	6 April–5 January	7 February
Q4	6 April–5 April	7 May
Final Declaration	Full Tax Year (Adjustments & Reliefs)	31 January (following tax year)

💡 Note on Tax Payments: Quarterly updates are informational summaries only—tax payments are not required every quarter. Your actual income tax and Class 4 NI payments remain due under the normal 31 January and 31 July payment on account deadlines.

5. Critical Compliance & Penalty Safeguards

Understand the new points-based penalty system: No penalty points apply to late quarterly updates during the transitional 2026/27 tax year. From the following year, each missed quarterly deadline normally generates one point; reaching four points triggers a £200 penalty (note that quarterly updates remain legally required during 2026/27).
Jointly owned property protocols: If you own properties jointly with a spouse or partner, verify how each owner's share of income will be tracked and reported under MTD simplified rules.
Section 24 finance cost tagging: Residential mortgage interest must not be mixed with property repairs. Finance costs must be categorized separately for basic rate tax credit computation at year-end.
Year-end tax accounting adjustments: Capital allowances, private use adjustments, balancing charges, and claims for loss relief are finalised during the Final Declaration stage.